Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=229724
Story Retrieval Date: 10/1/2014 1:17:08 PM CST
Dabrowski, vice president of policy at the Illinois Policy Institute, said “Our goal is to say let the workers have control over their own
Alternative proposal to fix pension crisis lands at City Hall
The Illinois Policy Institute submitted a proposal to City Hall on Thursday that it claims will solve the city’s pension crisis without raising taxes.
The proposal would do away with the defined benefit plan, replacing it with a “hybrid retirement plan” that would require employees to contribute 8 percent of their salaries to a retirement investment account.
“Our goal is to say let the workers have control over their own retirement and end politician control of retirements,” said Ted Dabrowski, vice president of policy at the Institute.
Employers would make a matching 7 percent contribution in the form of purchasing a retirement contract from an insurance company, which would pay out fixed monthly benefits, similar to Social Security.
The plan also calls for freezing cost of living increases for people who make more than $30,000 per year, and increasing the retirement age.
“This is not something new we are proposing,” Dabrowski said. “We’re not making this up. This is something that exists in Illinois.”
According to the financial expert, 15 percent of state university employees are already enrolled in a similar plan.
“Only professors have that right,” Dabrowski said. “Why should they have the right to have control over their own pensions yet teachers don’t get that right? And policemen don’t get that right? And firefighters? That’s just not fair. Just give city workers the option to manage their own plans.”
The Illinois Policy Institute has not conferred with union leadership about this proposal, but Dabrowski said he believes this plan is good for unions.
“Right now the union workers have no security in their retirements,” Dabrowski said. “The police fund is about 25 percent funded, firefighter fund is about 31 percent funded. There is no security.”
Stephanie Gadlin, spokeswoman for the Chicago Teachers Union said, “That’s not a plan, it’s a scheme.”
“There is absolutely nothing wrong with defined benefits,” said Stacy Davis Gates, legislative coordinator for the Chicago Teachers Union. She said the problem is that the city did not contribute to the pensions as agreed.
Gates said the hybrid retirement plan is too risky, comparing it to 401Ks that lost money during the great recession.
“I am frustrated,” Gates said. “Look at this discussion. Are they preparing these people for a retirement of poverty?”
According to Gates, a lot of people recognized they were making a trade-off by taking jobs in the public sector instead of higher paying jobs in the private sector. They knew there was “not a lot of money on the front end, but security on the back end,” Gates said. “They are being robbed.”
Representatives from the police and firefighters unions have not yet responded to requests for comment, nor has the mayor’s office.